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Spokane, Washington  Est. May 19, 1883

Coca-Cola’s reach may help your portfolio

Coke’s plan to turn things around includes cutting costs and boosting productivity, then investing those gains in areas such as marketing. (Associated Press)
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The world’s largest beverage company, Coca-Cola (NYSE: KO), has averaged gains of nearly 15 percent annually over the past 30 years. Its growth has slowed in recent years, but don’t count it out.

Recent challenges facing the company include a consumer shift away from carbonated beverages and some weakness in its North American sales. It’s an international company, though, and sales are growing overseas. A strengthening dollar has also hurt Coke (and other global operators), weakening the many foreign currencies that it collects in sales. But that’s far from a permanent problem.

Coke’s plan to turn things around includes cutting costs and boosting productivity – and investing those gains in marketing, advertising and innovation. (A recent winning innovation has been its smaller cans.)

In the meantime, the company isn’t exactly standing still, as its billion-dollar brands increased from 17 to 20 in 2014. The “still” drink category, including bottled coffees, waters, teas, fruit juices and energy drinks, seems to be the company’s future, with sales volume growth about four times stronger than that of carbonated drinks. It has invested in Keurig Green Mountain and Monster Beverage.

Coca-Cola offers a tempting dividend, too, which recently yielded 3 percent. (The Motley Fool has recommended Coca-Cola, Keurig and Monster Beverage, and owns shares of Monster Beverage and options on Coca-Cola.)

Ask the fool

Q: I’ve been investing in stocks through DRIPs. For tax purposes, do I need to save all my paperwork showing purchases, sales and dividend reinvestment information? – E.C., Avondale, Arizona

A: You sure do. That’s a key downside to direct investing plans or dividend reinvestment plans (also known as DRIPs) – paperwork and record-keeping. But the upside is considerable: You can avoid brokerage commission costs when buying shares, invest small amounts at a time, have your dividends reinvested in additional stock, and over time amass large sums.

Learn more about DRIPs at fool.com/School/DRIPs.htm, directinvesting.com and dripinvestor.com.

Q: How do municipal bonds work, and are they good investments? – J.K., Kinston, North Carolina

A: Municipal bonds, or “munis,” are issued by state and local governments to raise money for expenses such as building bridges, expanding schools, maintaining roads and so on. They borrow the money from us, and the fixed-interest rate they pay is usually exempt from federal taxes and often from local taxes, too.

Be careful if you’re receiving Social Security benefits, though, because interest received counts as income and could cause some of your benefits to be taxed. Some municipal bond interest counts in alternative minimum tax calculations and can complicate your tax return, so perhaps consult a tax adviser before purchasing any. Capital gains on municipal bonds are taxable, too.

Understand, also, that not all municipal bonds are alike. Some issuers are riskier than others, and rates vary. “General obligation” municipal bonds are backed by the issuer’s credit, while “revenue bonds” can be riskier, as they depend on the project being funded to generate the needed revenue. The minimum investment in municipal bonds is often $5,000.

Learn more at municipalbonds.com, bondbuyer.com and investinginbonds.com.

My dumbest investment

My dumbest investment, but best lesson, happened via the silver bust of 1980. I was 13 and used $108 (Canadian) of my hard-earned paper route money to buy 2 ounces of silver. It was quite exciting to travel to the towering head office of the Bank of Nova Scotia to buy the shiny pieces. Within weeks, the market manipulation by the Hunt brothers collapsed the market, and the value of my silver was down to about $12. – B.M, online

The Fool responds: That was a weird chapter of financial history, where the Hunt brothers spent years accumulating a big chunk of all the world’s silver, sending its price soaring. They hoped to corner the market, but the market collapsed, and in part due to their having used a lot of borrowed money, wiped them out. It took out many other investors, too.

A lesson here is to not assume that a soaring investment will keep soaring. And the Hunts’ downfall is another lesson, against investing with borrowed money. Fortunately, you were very young. That’s the best time to learn critical lessons.